Technical Talk: View pullback as buying opportunity

We said several weeks back that it was hard to see the market top when bullish sentiment surveys were so neutral. Additionally we stated that tops were usually met with exuberant buyers not traders salivating to put on shorts. So here we are several weeks later and two indices – the Nasdaq Composite and the Russell 2000 – are both at new post-market low highs. When the Nasdaq and Russell 2000 are both making highs it again is hard not to maintain a bullish bias.

Given that the market has rallied nearly 10% in the last few weeks, expect a shallow to moderate pullback to occur; however, we believe this pullback will present a buying opportunity.

The economic calendar will remain volatile as investors overinterpret every release; however, by and large we believe the economic recovery will continue on its course and this will cause the last reluctant sideline monies to finally join the party. Only when all liquidity is exhausted and all the buyers are in will this move likely end. Our guess is this will occur somewhere in the range of S&P 500 1,200 to 1,300.

So for now weakness appears to be an opportunity to buy stocks, especially in the areas that are working, i.e. technology and small caps.